Agricultural Bank of China Limited

Han Guoqiang, secretary of the board of directors of the Agricultural Bank of China, ABC. So the wind is very cool and the sky is very clear. In this picture-risk early autumn season, we are very pleased to have with us the investors, journalists, and analysts to attend 2022 interim results announcement conference of ABC. I would like to extend a warm welcome to all of you for your gracious presence. And I would like to express my sincere gratitude to all the sectors of the society for your long-term concern and support. Thank you. Well, for this interim results announcement, we have Mr. Gu Shu personally led the senior management to attend the performance conference and set up these online telephone and offline communication with the -in-one mode. So this meeting would facilitate friends and investors both at home and abroad to have a full interaction. So now I would like to introduce the senior management representative of Agricultural Bank of China who attends the conference today. They are Mr. Gu Shu, chairman and executive director of Agricultural Bank of China. Mr. Zhang Xugong, executive director and vice president of Agricultural Bank of China. Mr. Ling Li, executive director and vice president. Mr. Xu Han, vice president. And Mr. Wang Tingxi. And Mr. Liu Shidong will come to the conference via the telephone, independent director. And we have two parts today. The first part will be introduced by me about the operating results of H1 this year. The second round is interaction, responding to the concerns and the questions from the analysts and friends from the media. Now let's have the first session. I will introduce the operating results of ABC in H1. For H1 2022, ABC has confidentially implemented this development of economy should be maintained while preventing and controlling the pandemic. We have made the progress of our own business and we still have already got this resilient development of all the operation. The first is the efficiency has been maintained very stable. So we have 287 billion of the profit up by 5.9%. And for growth margin is up by .86% and for net profit is up by 4.9%. For this investment return is 0.84%. The second one is about the scale of our business is coming to another height. So the first is our overall asset is over 32 billion, a trillion and with 1.6 trillion of the newly issued loan and up by 9.6%. So for the deposit we have is a 26.3 trillion and increased by 2.7 trillion RMB. So for business related deposit is reaching 8.93 trillion for our deposits and the total amount is all taking a lead among the industry. And the second thing is finished. The third is we focus on the new growth but the newly issued loans are going to this major project, green development, technological innovation, key projects, et cetera. So for this project loan is 474 billion RMB. So for manufacturing industry loan is for 2.1 trillion RMB up by .5% for mid and long term loans is up by .3% taking a leading lead in industry. So for this green industry it is reaching 2.37 trillion RMB. So serving this small and medium sized business to making the benefit from here. We have 1.27 trillion RMB issued to this small and medium sized company. And we actively reduce the payment and give our profits to the companies. And with the impact of the pandemic, we have given them 2.5 trillion RMB for the bond investment. We have reached a record high of this support for the local government reaching 56.38 million RMB. So as this leading bank for rejuvenation of the rural area we have increased 71 million RMB. So for this increment and the proportion has all making the record high in the past 10 years. So there's a newly added one is 94.4 million RMB. And for this seed industry is up by 46% helping the Chinese rural areas and farmers to have that. So we have 1.6 trillion RMB for the loan and 160 county with this poverty lifting key aspects and areas that we have given them a huge amount of loans. And we have already been rated as excellent for that. The fifth one is we have implemented this overall quality of the loan. So compared with each one, we have about .02% of this bad loan and we are alleviating the risk and preventing the risk from getting worse. So we also have this precaution method to coordinate the risk of solving and protect the rights of the house buyers. And we have 5.37 systematic modules to have 100% coverage of all this high risk aspects and accident aspects. So next one ABC will fully implement with the state council and the central government deployment to have the high quality development. So that's my overall introduction for each one's operation. Now let's come to this interaction session. I will first have this onsite interaction with online communication in the middle. We try to take care of all the friends and the analysts present today. Please only ask one question per person. And when you ask a question, please first introduce your name and the name of your institute. So now we'll start. We'll have with us the first question. So what about we start from the one on my left. So this person, first row on the left. So thank you so much. I am CCTV journalist, I'm coming to ask you something about the loan. So in July we have seen it's a significant job with the social financing. I wanna know what is the situation of ABC? So it's already coming to the end of August. So this information of July and August that have already been seen. So what about the H2 fast credit expansion? How do you maintain that? Thank you so much for the question. We will have the answer. So before answering your question, I will just say to all the friends from the media and all the analysts, I would like to say welcome and thank you. It's about more than three years. We haven't got this kind of offline -to-face communication. And because of pandemic control and prevention, a lot of friends who hoped to come to our offline conference, they are still online. So no matter if it's from online or offline, I would like to say thank you. I hope for this kind of a method for the next about 1.5 hours, we could have a more in-depth and happy communication. So let's come to the CCTV journalist question for July with the multiple factors, the social financing data has decreased greatly. And in July for Agricultural Bank of China, we have still got very stable loan issuance. So according to the central bank's data, we have about 168.1 billion RMB. So compared with July last year, it is up by 37.8 billion RMB. So you mentioned that July compared with last July, we have got a big decline. However, from our own bank, our own data in July, we actually increased a lot compared with that of last July. So the second question you proposed is for the follow-up credit issuance and loan issuance, how would that be? So I think this is a very important question for this macroeconomic operation and the operation of the bank for H2, it's all very important. So I would first talk about the conclusion. For July and August, we have already come to the 29th of August. And we can actually say that for our issuance of credit and loan for August, it will exceed that of last year's data. So for a single month loan issuance, they have all exceeded the same amount that is had in last year. So we still have four months to go for 2022 from September to December. We judge that this kind of credit increase, surpassing the amount YOY, we think it could probably be maintained for Agricultural Bank of China. And this is our judgment. And for September to December, our credit increase will exceed that of last year, probably it could be maintained. And why we are making the judgment like that. So I'll first talk from our own bank. So for current credit reserve, we have already approved, but yet to be issued credit reserve, we have done this analysis until the end of July for this two business loans have already been approved is 2.12 trillion RMB. It is already being approved, but not being issued. So compared with that of last July, it's up by almost 600 billion RMB. So until last week for this kind of reservation, it has up to 2.47 trillion RMB. It is almost 800 billion higher than last year YOY. And indeed, as I said, no matter the 2.12 trillion or 2.47 trillion, they are not necessarily being issued. So maybe in the whole process, maybe they will just go to other different banks to have this final loan being collected and maybe not necessarily from our ABC, however, for two business credit reservation. I would like to say that compared with last year, we still have a quite stable reserve for that. And of course, for this kind of credit reserve, I would like to say that this is like weaker than that. However, if we from this reserve aspect for this newly added one, it could make up for this a declined one of this personal loan issuing. So this is from ABC's perspective to do the analysis of our own credit reserve. So the next thing is from this macroeconomic operation, let's talk about our own situation for this number disclosed on 12th of August, especially the speed of loans, it has already been lower than our expectation as mentioned by the CCTV journalist. So we can see from

this data, and finally, we are actually in terms of the social finance loans increase, we are lower on a young year basis. This is just for now, and it's temporary. On July, we will be impacted by the increased amount of the Royal Sea market from the middle and long run. We can see that economic growth need to have a transformation, this is a transformative process, and we have a transformation from new energy to old energy momentum, and this is not necessary to be very smooth. So the data in July will not necessarily set for the trend and normally in July, and we still don't have a solid infrastructure, and it still takes some time to affect it more well, and we need to have a preparation. So on July, the actual work amount actually is under reservation, and we can see from the data of July that the M2 growth is more as the deposit amount, compared with last year growth hugely, and all the back, we need the growth of the bank, the deposit compared with the previous years, so this is a very good phenomena. And later with the policy support, I believe that we will keep a stable growth, and the expectation of the Royal Sea will be more stable. The urbanization process now had some slow down, so we hope that in the very long run future, we can take it step by step, and we will not have a large gap with very short period of time, and the dry situation actually, it doesn't necessarily set for the future trend. This is all a weak expectation and prediction, so when we look at the credit reserve of the bank, as well as our expectations and judgments for the macro economy, the COVID-19 situation, as well as the future trend in July, August, and the future quarter is from September to December, our growth amount actually has the trend to exceed and outperform the data from last year, this is our trend. So to put long story short, with the future, now we will invest more on the following directions. In terms of the reserve, we will focus on the following fields. Mainly, there are fields I'd like to mention to you. The first, we will further enlarge the investment of the credit and loans of the infrastructure project, and to further focus on the key projects of the infrastructure engineering, and second, we will also enlarge the percentage of county and city level loans, and certainly we will largely serve SMEs, and macro economies, and companies, and focus on manufacturing industry, and also support the essential housing mortgage loans amount, and that's all for my answer for this question, thank you. Thank you, Mr. Chairman, for your systematic and comprehensive answer on this question. Next, we would like to welcome the next participant to raise up the question, and the first gentleman at the third row, please raise up your question. Thank you for giving me this opportunity, I'm now a shift analyst, and now we mentioned we focus about the rest in real estate industry, so I want to know that what's the exposure or gap of ABC in terms of public housing real estate loans, what's the asset quality trend, has the real estate risk been fully reflected? And first of all, thank you for goodness sacks for this question, and I think we all focus and pay attention to this, and ABC has always following on this concept that that is the real estate is for living, not speculation. So it also decide on our loan policy, we need to meet the reasonable demand of the real estate industry to support the vertical circulation, and we also this year, this month of 2.9 billion with a growth rate of 1.49%, in the first half we placed about 100 billion and 110 billion with a growth rate, and actually with this pressure in the additive amount loan, and the balance is about 30 billion, growth by 5.3 billion, growth by .58% compared with the previous years, and for some companies expand very fast, they had also the risk of frost expansion, and we can see that the residue and balance is not very sufficient, but we have the risk under control, the second half of ABC will follow the deployment of the city council as well as the central bank to seek to the focus on the best development and stability on the credit assets, we will enlarge the financing and fundraising of real estate to make sure the stability and the smoothness of the fundraising in real estate industry to satisfy the reasonable fundraising requirements of all kinds of real estate and real estate industry, and for the materials, we need to focus on the livelihood features and to focus on the public projects, and on one hand, we need to further enhance the risk control capability to avoid and prevent the risk and not use one of the formal method to all the companies, and second, we need to enhance monitoring of the risk to further have the whole process of risk control and prevention, and to also try to mitigate the risk in the industry, and with the MA and other financial methods, we will work with the local government to provide a good support in terms of financial services. Thank you, and next, we would like to welcome the next participant to ask a question, what about the gentleman sitting in the last row in the middle? Okay, thank you for giving me this opportunity, I'm Xu Yan, an author analyst, and we noticed that we also encourage the facts, especially large facts, in Q1, ABC had a little poor performance, so what's the future prospect of your back in future? And thank you for your question, I will try my best to answer it on April 13th, the emissions requirement, and just being attached with the importance from the ABC, and we make conditions to the real economy to reduce the tax, and thus, we hope to improve the stability, and the provision coverage is 300%, and dropped by .2% compared with the beginning of this year, it's 1% higher, so this is the change you've just observed. Actually, in the future, what about the policy of the provision, and I think you are all concerned about this question, because it's highly related to your profitability as with ROI, and for the provision policies, I think it's included two aspects, actually. One hand, it's about the amount, the added part, the second is about the release of the reserve, and so actually, the provision rate is decided by this, and by these two aspects, in the future, the provision policy actually can be analyzed in these two aspects, first is about the newly added one, and the upgraded one, and for this part, we would like to take a prudent attitude, and the principle, according to the accounting standard, and the monitoring requirements to apply for it, and this is the best of the regulation requirement, as well as the accounting standard. The second aspect is about the reserved part, and what's our policy about this? We will, based on the requirements and demand of the management, to reasonably release the provision reserve, and thus, we can only support the development of the real economy, but also, on the other hand, support the investors, the ROI, to make sure the ROI can be remained at a relatively stable level, and this is about the next step, the provision coverage, this is about the words I would like to share with you. Overall, speaking, the provision coverage, provision coverage will continue to drop, step by step in the future periods of time, and this is being impacted by these two aspects, so what level it will drop to, it depends on the operation, the situation of the macro economic development, and just now, we talk about the release of the reserve, and it's actually based on the demand of a present macro management, so today, I would like to also take this opportunity to share with you about the follow-up questions that is about the valuation of the BACS, and just now, for the question you asked, actually, it's kind of related to the evaluation, the valuation of the market to BACS, I think it's under-evaluated, underestimated, and there seems to be a mistake that is the provision policy, we talk about the macro present attitudes, as well as periodical management, this is actually seems to be contradictory with the market operation policy, and I know that maybe you've done some research on this aspect, and analyze, I think that for some analysts in China, the BACS, they need to be subject to these aspects, so it's very hard to conduct the marketing-oriented evaluation towards China BACS, which results to the under-evaluation, so I think this is actually a misunderstanding, now in the market, if we look at the situation the whole world, we have a more clear picture, any BACS, actually, our special companies, they actually have the function of releasing, mitigate the risk, and remain the stability of the macro economy, so we have a economic downturn, when we squeeze the loans, this is not a good method, if we have a good macroeconomic development, which is the present attitudes that cannot necessarily get a good result, so I think that we need to have a more holistic view towards this, so I'd like to also appeal for all the analysts and friends, as well as friends from press, to make more interpretations, and to have more positive interpretations in this regard. In this way, the operation and the regulation concepts of the BACS actually are aligned in the whole world, this is actually the attitude and the way of working of the whole BACS, as well.

So this is why I would use this question to say something about this value assessment for the banks, I hope that you could make a positive one of this value assessment for Chinese banks, thank you so much, and for president's professional ones, so we will give this opportunity to the middle section, so the gentleman at the side in the middle section, thank you so much for giving me this question, I am Peng Bo, I would love to ask a question about the mortgage loan, I'm from City, you can see that for this overall mortgage loan, it's generally weak this year, so what is the situation of BACS, we asked the first one, what is the new issue of the mortgage loans, and secondly, the early repayment, what is the interest, and then what is the newly issued loan, and for the guarantee of this home delivery, what is the situation, and please also look forward to this H2 situation, but really this is so detailed question, and Mr. Ling is the responsible for this, I would like to have Mr. Ling to answer the question, thank you so much for the question, so since Q4 2021, ABC has conscientiously implemented this regulations, the requirements to have this reserve cycle and the cross cycle adjustment to directly support this urgent demand for home purchase, I have to say that personal mortgage has already maintained a quite stable development, so each one, we have 313.8 billion RMB and $1.8 billion, net increase is 102.5%, 16.62%, and for the business development process, we carefully implement this reduction of the payments and share the profit with the citizens, so for each one, newly issued mortgage loan rate, compared with last year, it was down by 20 BP, I have to say that this is the overall business development situation in the work, we also have a very in-depth understanding of a personal mortgage loan, on the one hand, it is related to all the different families, second is also related to the healthy development of the civil estate market, and later we also will increase this integration of mortgage, and we also further enhance the investment of this mortgage, the first one is we actively connect with this good, high quality brokers for secondhand homes, and then to have this business reserve for that, and the second is actively participate in this innovation, and we still have some key projects being researched, and according to this promote new projects, where we develop that in a mature way, and the next thing is implement this optimization of this credit issuance policy, so here we have already done a huge amount of work, including to simplify this application document, to adjust the threshold of the customer, and to improve this approval efficiency, the fourth is to expand the technological support, to fasten this IT system construction, to have this overall management and MIT team confidence, to better serve this home mortgage customers to have this technological empowerment, so for this pre-positioned one, and we have to say that we will just protect this building guarantee, and this is very important, I have to say that we have to have a very clear judgment, and we need to balance all the different parts of the relationship, and care about this reasonable support, and comprehensively improve this guarantee of this home delivery, so for risk of this delivery, we have 1,112, and the final one is 1,000, so this is a high risk loan, we mount to 12.3 billion, taking the whole proportion of 0.023%, so now we have already 746 projects being included in this local government guarantee of the delivery, and now 60 projects have already got the condition of being able to be delivered, and for small amount of residents choosing to repay the mortgage at an earlier way, it's actually based on their own financial planning, and it also has something to do with the current declining profit of this wealth management, and for this aspect, we have to speak to customer centric to give them convenience policy of the early repayment, and exempt the default payment, and based on this big wealth management system to target the service given to this mortgage customer to satisfy the customer's managing their wealth, and that's all for me to answer that. Thank you so much for Mr. Ling. So thank you so much, and I am Hu Yao, and we all know that ABC is in the leading position in the same trade in terms of the live customers on this mobile app, and in terms of customer conversion, what measures have been taken to convert from MAU to AUM, what is the current effect, and the next step, how ABC is planning to follow the trend of digitalization and make more services from offline to online to reduce this service cost. Thank you. And I would like to say that, so I understand there are three parts of your question, and the first one is about the development and the growth of this mobile app, and second is the conversion, and the last is how to reduce the cost and do that, so we can see that the mobile app is the major interface of all the different players, so we are using entire ABC's power to develop our mobile app, and here at the end of June, we have registered 434 million card holders, and for this monthly activity is 164 card holders, and it's up by 11.7 million, so for this increment, or the total amount is all taking the lead, so this is having absolute leadership, and this is what we are expanding for our leadership, and the second question is, AUM and MAU conversion, how do we view that? Actually, so for AUM, with a bigger amount, and MAU will also be bigger, with MAU being big, you could have a better AUM, it's hard to understand that one person having no money in the bank, and then their mobile app is active, so this is like we think that with the traffic to develop the product, and with the development to have that, and the thing we do recently is surrounding this overall customer journey to constantly optimize with the key business, and we can say that for this key business point, we could have even more than 10 different kinds of this optimization for this mobile functionality, and this is easier for the users, we can clearly see that, so we can see that the ABC growth is actually very big, and it's definitely like with a more than five digit growth, and the next thing is, for certain customers' products portfolio, we have done this country version, we have this medical insurance section, and car driver section to help the customers easily locate what they need, so with all those measures, our monthly active user for our AUM is 38.2%, is higher than any used one, so we can see that it's about 5.6%, that is to say that our development is high speed and high quality, this is what I want to answer you, and the third thing is how to lower the cost, first, how to understand this question, first of all, I would like to give you a number, so until June, our daily activity is over 28 million car holders, and we have about 2000 offline sites, so if without this mobile app, if they go to every offline service points, it will be over 2000 people per site, so on average, now it's about 70 to 80 visitors, and they come to this offline site, it will be like a quite average, quite normal, and if it's over 300 car holders coming there, they will have complaints, so that is to say that for our fixed cost, and for their efficiency has already been utilized, and this is what I want to say, without the mobile app, it's impossible for us to have so many customers being served in a high quality way, and this is the first one I want to answer, the second thing is, so our purpose is not necessarily like lower the cost, so lowering the cost is like the permanent topic as a listed company, however, we have to balance, the service, it's not just like making all the people to chase to the online one to lower the cost, we try to do the synergy of online and offline, and to give the best quality one, and we can also say that for some special people, they also will do the services offline, this is like giving full play to our online and offline advantages, I don't know whether I have answered your question or not, thank you so much, so we will carry on the QA session, so we will say line four of that section, thank you so much for giving me this opportunity, I am from CICC, I'm Lily Han, I would like to ask a question, it's about this interest rate gap, so what is the reason why we have like a lowered interest gap, and I wanna know that what are the prospects of this interest gap in H2 and how they stabilize that, so thank you so much, thank you so much for the question, and I say that for the management of this interest gap is a very important policy for us to manage our bank,